Why Jersey City's Lawsuit Against Redistribution is a Good Sign

Mayor Steve Fulop and the Jersey City City Council have announced that Jersey City is going to hire

Up Until Now, Fulop has relied on Vincent Prieto
to block state aid redistribution.

a law firm to fight off any attempt to redistribute Jersey City's $420 million in state aid.

Before I get into why this is a good sign, let's have some backstory about Steve Fulop and state aid.

After state aid redistribution became a possibility in early 2016, Steve Fulop refused to discuss the subject in a serious way.

Fulop showed his immaturity in a series of petty attacks on Jack Ciattarelli, where when Ciattarelli said that Jersey City's economic growth indicated that its state aid needed to be redistributed, Fulop returned fire by bragging about Jersey City's economic growth.

“It’s easy for local policy makers to achieve tax reductions when the state subsidizes their services,” said the Assemblyman. “The fact is, fiscally speaking, we’re experiencing a very painful squeeze or crowding out effect with our state budget. Overly generous property tax abatements are one of the reasons why. These abatement are not only an exploitation of our state school funding formula, they are an injustice to property owners in places like Jersey City. In trying to solve the state’s problems, we need policy makers at all levels of government to take these issues seriously. In that respect, the statement issued by the Fulop camp is an embarrassment and a disservice – a disservice to the taxpayers of this state who fund Fulop’s school system.”

To which Fulop responded in a way that proved Ciattarelli's point:

“Jersey City had a tax reduction last year and just today we will adopt a budget without a tax increase. Jersey City has led the state in job creation just as we had a credit upgrade last year.

After that, Fulop switched tacks to refusing to say anything in public about state aid, but using his control over Assembly Speaker Vincent Prieto to block reform.

His comments at this point were few and far between. By September 2016, according to Jersey Journal reporter Terrence McDonald, "Mayor Steve Fulop has declined several times to comment on Christie's and Sweeney's plans" other than to say it was a " long road" to reform becoming a reality and then another ignorant statement on how SFRA works "Urban education is very complex. I don't think in certain areas parents and cities have the same means to pay as in some of the suburban areas."

Which of course is an untruth regarding Jersey City. For 2016-17 Jersey City's school tax rate was 0.47, less than half of New Jersey's 1.3 average, so certainly Jersey City can pay more than that.

Over the next few months Fulop was again silent, but he used his clout with Assembly Speaker Vincent Prieto to block state aid reform.  (even though Prieto actually represents several of New Jersey's most underaided districts)

Yet by February 2017 state aid reform had enough momentum that Fulop decided he had to say something and what he said was bullshit, claiming state aid redistribution was “clearly an attack on poorer, primarily African American, Latino and minority districts.” Fulop also gave a two-faced argument where he claimed that only Jersey City's waterfront is doing well (even though Jersey City is a single-entity from the point of view of taxation), even though Fulop constantly claims to Jersey City audiences that the whole city is thriving.

Anyway, after Steve Sweeney tore apart Fulop's arguments and Fulop's distortions were exposed again Fulop decided that what Jersey City needed to do was hire a law firm for $75,000 to fight off the redistribution of Adjustment Aid.

As Fulop spokesperson Jennifer Morrill said: "Our plan is to continue to fight for Jersey City students and residents every step of the way."

Or in other words, "if it's good for Jersey City, then screw everyone else."

Public Opposition is a Good Sign!

While many people are angry about Jersey City's litigation and blatant indifference to the fate of the rest of New Jersey, I think the litigation itself is a good sign.

Fulop never took state aid reform seriously prior to this winter.  Presumably he knew Prieto would block it.

But now that Fulop is actually speaking out against redistribution and wasting $75,000 of Jersey City's money on a law firm it means that Fulop has a fear of redistribution that he didn't have before.

We in the public have never been privy to what conversations Steve Fulop and Vincent Prieto have.  All we know is that Fulop is against state aid redistribution and he boasts "I have significant clout with the Speaker."

But if Fulop is now hiring a law firm, that means that either his control over Vincent Prieto is loosening or Prieto has told him that he isn't going to be able to block state aid redistribution much longer.

So while it's infuriating that Fulop and the City Council have this unbelievably self-interested mentality (they all purport to be progressives), the fact that they finally feel they have to fight for Adjustment Aid means that they finally take seriously the prospect of its elimination.

Jersey City City Council:
If It's Good for Jersey City,
Then Screw Everyone Else

New Jersey=Debtors' Prison: The 2017-18 Budget

Note, this post was accurate at the time it was written regarding flat-funding for K-12 operating aid.  In June 2017 Steve Sweeney pushed through a deal that did increase K-12 aid by $100 million, PreK by $25 million, and Extraordinary Aid by another $25 million.   See this update on disparities for a look after Sweeney's last-minute changes.

Everything in this post I say about categories of debt getting the lion's share of new money remains still accurate. 

The Garden State

For 2017-18 K-12 state operating aid for school districts is increasing by a measly $3,140,585, all of which is going for Interdistrict Choice and Host District Stabilization Aid for Newark.

Of New Jersey's 577 school districts, only 91 are receiving any aid increase at all.

Even New Jersey's most savagely underaided districts, like Manchester Regional, Freehold Boro, East Newark, Chesterfield are gaining nothing.  Bound Brook, who was the most underaided school district for 2016-17, is getting a $6,387 boost, which is for perhaps another Interdistrict Choice student.

Atlantic City, which had lost another $2 billion in Equalized Valuation, gained nothing other than $60,881 for Interdistrict Choice.  This is a contrast to last year, when Atlantic City gained $32 million last year for "Commercial Valuation Stabilization Aid."

Since state aid for 2016-17 was $8,031,337,333, the increase is an imperceptible 4 one-thousandths of a percent.  2016-17 was a bad year too, but at least in that year K-12 aid increased by $90 million.

Yet there is more to this story than just the headline aid increase of $3,140,585 and that untold story is large increases for New Jersey's debt.

• TPAF funding is increasing by $411 million.  
• Post-retirement medical funding for teachers is increasing by $69.9 million.
• Debt Service on Christie Whitman's Pension Obligation Bonds is increasing by $15.4 million.
• Debt service aid (which goes directly to districts) is increasing by $17.4 million.  

State Debt Servicing, which is for the bonds the Economic Development Authority floated for (mostly Abbott) construction is increasing by $20.5 million from $898.3 million to $918.8 million.

New Jersey's expenses for teachers Social Security is actually falling.  Perhaps this is due the 2016-17 budget cuts meaning that there are now fewer teachers?

Because TPAF and other education debt expenses increased so much, education spending (broadly defined as opex aid and other education-related expenses) is now 39% of the state budget versus only 31% of the budget in 2001. (FY2018 = $13.8 billion out of $35.5 billion)

Click to Enlarge.
Source, pg 41
http://www.nj.gov/treasury/omb/publications/18bib/BIB.pdf

And for comparison's sake, here is where the increase for 2016-17 went.  (the graph refers to "proposed increases," but these proposed increases actually were implemented.)

As you can see, it's the same story.

Jersey City PILOTed Property is Worth $11.6 Billion

FYI, this article by Terrence McDonald of the Jersey Journal about Jersey City PILOTs is worth reading for several reasons, but I wanted to point out something from the conclusion of the article:

Last year Jersey City's PILOT program took in $127,800,476 from tax-abated properties. If all these properties were taxed conventionally, the total would be $211,967,791.

None of This Pays Any
School Taxes

(The relevance of this to state aid is that PILOTed property is "invisible" to the formula for Equalization Aid, thereby sustaining an artificially high state aid package for Jersey City.)

The State of New Jersey has no comprehensive database on how much property towns have in PILOT status, but the publication of  what Jersey City's PILOTed properties would pay if they were subject normal taxation allows one to calculate what the PILOTed properties are worth.

Jersey City's all-in tax rate is only 1.826%.

If Jersey City's PILOTed properties would pay $211,967,791 in taxes, that means that their full valuation is $11.6 BILLION.

$211,967,791 / .01826 = $11,608,312,760.10

This is up substantially from 2015, when Jersey City's PILOTed properties were only worth $8.6 billion.

$11.6 billion is a gigantic amount, it is equal to 45% of Jersey City's $25.7 billion in taxable property.

If Jersey City's PILOTed properties were an independent city, their Equalized Valuation would be the seventh largest in New Jersey.

Here are the top Equalized Valuations in New Jersey:

1. Jersey City's (taxable) $25.7 billion
2. Edison $15.8 billion
3. Toms River $15.167 billion
4. Hoboken $15.128 billion
5. Newark $13.8 billion
6. Ocean City $12 billion
7. Jersey City's PILOTed $11.6 billion
8. Middletown $10.6 billion
9. Woodbridge $10.5 billion

At Jersey City's tiny 0.471% (Equalized) school tax rate, those PILOTed properties should be paying $54,675,153.10.

The $11.6 billion is also equal to 16% of Hudson County's $71 billion in Equalized Valuation.  At Hudson County's 0.458% tax rate, that means that that PILOTed property should be paying $53 million in county taxes.

Hence, the distortion of Hudson County's taxation cannot be ignored any more than the distortion of school taxes and school aid can be.

This means that taxpayers in Hudson County's several severely underaided school districts - like Bayonne, Guttenberg, East Newark, North Bergen, and Kearny - are victimized twice by Jersey City; first as state taxpayers who must subsidize Jersey City's schools, second as Hudson County taxpayers who must subsidize Jersey City's county services.

As Jersey City blogger CivicParent has documented, when Steve Fulop of Jersey City campaigned in 2013 for mayor, he attacked the incumbent (Jerramiah Healy) for granting PILOTs, saying PILOTs "robbed the schools."

If elected, Fulop swore he would share PILOT revenue with the Board of Education.

HOWEVER, after he won the election, Fulop immediately forgot that promise.

Although there has been an attempt to reduce downtown tax abatements - Fulop should get credit for not PILOTing the supertall skyscraper 99 Hudson Street - since Fulop became mayor Jersey City has given out 70 PILOT agreements, presumably worth billions.

Although the primary thrust of Steve Sweeney's state aid reform fight is to eliminate Adjustment Aid, Sweeney's effort to end the distortion of state aid that results from PILOTing cannot be ignored either.


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See Also

• The Problems of PILOTs (this was an early post of mine and I now realize it was incomplete not to talk about Adjustment Aid.)
• Jersey City's Property Reassessment Won't Change State Aid
• Jersey City's Taxes are the State's Most Unfair (Is Anyone Surprised?)
• Jersey City Should not be an Abbott
• Jersey City's Development Boom, Pre-K, and the Aid Cuts Coming Your Way
• PILOTed Chic: Asbury Park's Hidden Wealth

John Wisniewski State Aid Plan, the Good, the Bad, and the Insufficient

Wisniewski's Aid Plan:
The Ends Don't Quite Meet

Gubernatorial candidate John Wisniewski has just come out with a plan on state aid that he claims will bring every district up to 100% funding entirely through higher spending, without redistribution.

As usual, there's some good news and bad news in this.

The good news is that Wisniewski is talking about state aid at all, which is an issue he has generally ignored on the campaign so far.  It is also laudable that Wisniewski actually has come out with a set of specifics on where the new revenue will actually come from, which is a major contrast to Phil Murphy, who frankly has a vapid "I'll fully fund the formula" line.

Although John Wisniewski is not the only Democratic candidate with a plan on state aid (Sen. Ray Lesniak supports Steve Sweeney's approach), Wisniewski at least is putting the most original thought into aid.

That being said, Wisniewski's plan comes up short.

The fastest way to immediately provide property tax relief in New Jersey is to fully fund our public schools.John Wisniewski is prepared to close the educational funding gap by taking the following actions: 

Restore the estate tax.  We must overturn the “deal” made between the Legislature and Gov. Christie last year that began the phase out and eventual elimination of the estate tax.  John Wisniewski voted against eliminating the estate tax because New Jersey is already underfunding education and we cannot afford tax breaks that benefit an estimated 3,500 super wealthy families at the expense of 1.4 million students.  Restoring the estate tax will generate an estimated $150 million within the first year and will eventually put as much as one billion in revenue back into the State budget. 

Freeze corporate welfare.  John Wisniewski will enact an immediate freeze and review of all corporate business tax incentive programs.  Gov. Christie has abused these giveaways as he has doled out $7.4 billion in corporate welfare to his wealthy friends and political cronies — without generating any measurable economic activity.  Simply freezing these giveaways will free up an estimated $800 million annually. 

Wisniewski will sign a millionaire’s tax.  Adjusting New Jersey’s highest marginal tax rate will generate $500-600 million annually.  Education is an investment in our future that pays dividends.  It is not unreasonable to ask New Jersey’s wealthiest residents to help fully fund education and provide property tax relief. 

Overturn Gov. Christie’s $300 million State House renovation.  New Jersey has to tighten its belt and this extravagance must wait or be bid out for much less money.Our next governor must think about New Jersey’s next generation, not the next election.  John Wisniewski will fully fund K-12 education.

First of all, even if we accept all of Wisniewski's assumptions on how much money would come in from these tax increases, the total is woefully insufficient to fund even the K-12 portion of SFRA.

If we accept Wisniewski's own numbers of $150 million from a restored estate tax, $800 million from eliminating tax incentives (which I'm highly doubtful on), and $600 million from a higher income tax and you assume no rich person or business leaves New Jersey and Wisniewski can put every cent into K-12 education, it doesn't add up to 100% funding.

$150+$800+$600 = $1.55 billion.

The cumulative deficit for the 379 underaided districts for 2016-17 is $1.93 billion.

That cumulative deficit will grow since the underaided districts are the ones with growing populations and/or falling tax bases.

Is repairing the Statehouse really an
"Extravagance"?

Wisniewski also says we can use $300 million from cancelling the State House renovation, but even if you agree with him that the renovation is a "extravagance," the $300 million is non-existent since the state was planning to bond that money through the EDA.

Is Wisniewski seriously saying NJ should start bonding money for K-12 operating aid?  Because his proposal to use the $300 million intended for the Statehouse Renovation is tantamount to this.   No state can stay solvent by using one-time revenue shots to fund recurring costs like K-12 spending.  

I agree with Wisniewski's proposals to increase taxes on incomes above $1 million and commend him for stating that this would only bring in $500-$600 million annually.

I also agree with Wisniewski's proposal to restore the estate tax, although I think he would find it politically difficult to restore it at the previous threshold of $675,000 since that was the country's lowest. Assuming Wisniewski could/would only restore the estate tax to $1 or $2 million, New Jersey would not recover the full amount lost.

However, by putting all of the estate tax revenue into K-12 aid (it previously went into the General Fund), Wisniewski would be taking money from one pocket and putting it into another. Since items paid out of the General Fund include non-discretionary spending categories like the Executive branch, non-TPAF pensions, and Corrections, taking this money out of the General Fund would put a lot of pressure on higher ed funding, which is technically discretionary.  But this conflicts with Wisniewski's plan to make public college "free" for students from families making under $125,000 a year.

The biggest gap in Wisniewski's proposals is his plan to fund K-12 aid by eliminating tax incentives.

If Wisniewski actually followed through on this, there would be no immediate savings since NJ cannot rescind tax credits already granted.  The theoretical savings would come from not giving out any new tax incentives, but even that assumes that the business would still relocate to New Jersey or remain in New Jersey without the incentives.

• If the XYZ Corporation is currently located in New York and says it would locate 500 jobs to New Jersey if it gets a $20 million (cumulative) tax credit, and John Wisniewski says no to a tax credit, New Jersey hasn't gained $20 million since the XYZ Corporation still won't be paying anything to the NJ Treasury!  The business will stay put where it is in New York State or go to another state that will gladly give it a tax credit.

• If the 321 Corporation is located in New Jersey and says it will relocate to Georgia if it doesn't get a $20 million tax subsidy, Wisniewski says no, and then the 321 Corporation really does relocate to Georgia, New Jersey still loses at least that $20 million, since the 321 Corporation no pays zero New Jersey taxes, plus tens of millions of more in spending power by the corporation itself and its employees.
• If Big Rebuild developers propose converting a vacant office building in downtown Paterson into apartments if they get a $5 million tax subsidy and Wisniewski says no, the NJ Treasury hasn't gained either since that renovation project probably wouldn't happen without a subsidy.

So Wisniewski is blowing hot air when he says that eliminating tax incentives is a budgetary salvation for New Jersey.

The Forgotten Piece:
A major missing piece of Wisniewski's proposal is any reform of how PILOTs distort state aid.

Conclusion:
So I'm glad that John Wisniewski has come up with a plan of sorts.  I hope this encourages Phil Murphy and Jim Johnson to come up with anything too.  I hope this encourages Ray Lesniak to talk about his support for Steve Sweeney's much more mathematically-literate plan.

BUT John Wisniewski has got to go back to the drawing board.

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See Also:

• "The Phantom Budgetary Salvation, Cutting Tax Incentives"
• "Jack Ciattarelli Understands State Aid, Budget Crisis"

SFRA Was Never Fully Funded

One of the most pernicious myths about the School Funding Reform Act is that it was fully funded in its first year, 2008-2009.

This myth is spread by the Education Law Center

NJ’s weighted student funding formula – codified as the School Funding Reform Act (SFRA) – stands as a national model of state public school finance. But the formula has not been fully funded since its first year in law (2008-09), and was cut in 2010-11 by Governor Chris Christie.

Including from Paul Tractenberg himself:

Tractenberg said the current state funding formula under the School Funding Reform Act has only been fully funded once under Christie. That's the real problem that should be addressed, he said.

and picked up by many journalists.

Example, Meir Rinde of NJSpotlight

The formula was run and funded for one year. Then the recession hit, Christie was elected, and he cut education aid overall by $1 billion (though half of that was eventually restored to Abbott districts).

And activists.

Example Elizabeth Ginsburg of the Garden State Coalition of Schools:

“The school funding formula that is written into law has only been fully funded once in the last seven years.”

And even the state legislature:

WHEREAS, While the SFRA was used to distribute State school aid for the 2008-2009 school year, since then the SFRA has not been fully funded and its provisions which lay out a constitutional pathway for the distribution of State school aid have been ignored and overridden;

However, SFRA was never fully funded in a real sense because in that first year districts were only funded at their Capped Aid levels.

It's rarely explained, but SFRA contains a cap in the amount of aid an underaided district can gain in a single year, either a 10% boost if the district is above Adequacy or a 20% boost if the district is below Adequacy.

From the statute itself:

d. For the purposes of this section, “State aid growth limit” means 10% in the case of a district spending above adequacy and 20% in the case of a district spending below adequacy. 

Due to the existence of these caps, there is a difference between the statutory full funding of SFRA and the real full funding of SFRA, which would be funding every district at uncapped aid.

In 2008-09, yes, every district was funded at its Capped Aid level, but there was a $1 billion funding deficit between actual aid and uncapped aid, which, again, is the real demographic-economic aid level for districts.

I got these data from the Department of Education via an OPRA request and have put the Actual Aid vs Capped Aid data online.

Let's look at Clifton as an example of how the State Aid Growth Limits (aka "caps") reduce a district's aid:

SFRA's formulas looked at Clifton's enrollment and tax capacity and determined Clifton should get $55,999,000, which would have been $5300 per student.

But what did Clifton actually get in 2008-2009, the year SFRA was "fully funded"?

$27,374,845.

Which is only $2,600 per student.

$27 million is actually 40% higher than Clifton's 2007-08 aid of $19 million, so I admit I don't know quite was going on here, but I know 

$27,374,845 ≠ $55,999,000.

And there are 278 districts that were, like Clifton, not fully funded in 2008-09, despite so many groups and journalists saying they were.

These are just the largest deficits in absolute terms:

The data I received from the DOE had errors for certain districts which I have removed from this graph, and yet reappear in the original source material:
http://bit.ly/2knaI6K

River Edge was the most underaided in NJ in percentage terms, getting only 19% of its uncapped aid. Northvale, Clinton, and Chesterfield also in the bottom four.

In that year Manchester Regional was the most underaided in per student terms, with a $5,300 per student deficit.

Overall, in that year there were 44 districts who got less than 50% of their uncapped aid, which is better than now, when 141 districts get less than 50% of their uncapped aid, but still, this means that many districts were still underaided even when SFRA was statutorily followed.

So, again, in 2008-2009, SFRA was fully funded in a statutory sense, but not a real sense.

The total cumulative deficit for the 279 underaided districts that year was $1.05 billion (not counting vo-techs).

Adjustment Aid was $850,612,518 ($948 million with inflation) that year so the net deficit appears to have been smaller then than now (It is now $1.4 billion in 2016 dollars, counting vo-techs), but when so many districts were still in 2008-09 substantially underaided, it's wildly inaccurate to say that "SFRA was fully funded in its first year."

Here's the bottom line:

New Jersey, going back to the 1970s, has always struggled to fully fund its aid formula.

Since the Great Depression, New Jersey's fiscal situation has never been worse, nor its economy more slowly growing.

New Jersey did not fully fund SFRA in 2008-09, and our oncoming pension depletion, stagnant economic growth, and the high spending targets of SFRA make fully funding SFRA now unrealistic unless the Democrats were to pass tax increases much larger than they have ever hinted at.

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See Also:

• The Long Wait for Full Funding Under Capped Aid
• It's a Myth SFRA was Ever Fully Funded (another post on this same topic, but without the 2008-09 official uncapped aid data)
• Christie Underfunded SFRA by $15 Billion

Three Cheers for Pemberton!

Tony Trogone of Pemberton:
Doing the Right Thing

The State Senate Education Funding Committee's hearing at Kingsway Regional had a great deal of emotional testimony from parents and administrators of underfunded school districts who demanded a redistribution of Adjustment Aid.

I will write more of that soon, but I wanted to highlight the surprising testimony by Pemberton's Superintendent.

The Pemberton is actually NJ's second most overfunded district (after Jersey City), with over $26 million in excess aid, or nearly $6,000 per student.

At the hearing, Pemberton's superintendent said that Pemberton was ready to lose Adjustment Aid:

Pemberton Township is one of the so-called overfunded districts and stands to lose millions if it's adjustment aid is eliminated. That's no easy pill to swallow, but township school officials say it's still preferable to Gov. Chris Christie's proposal to scrap the funding formula altogether and give all districts a flat per-pupil amount. 

Doing so would likely result in significant aid increases for many underfunded districts, but Pemberton Township would stand to lose $52 million [this is erroneous, the amount is $26 million] , well over half of its $83 million in annual aid. 

Superintendent Tony Trongone made the trip to Kingsway to testify in favor of his district, which has large populations of students from military families serving on Joint Base McGuire-Dix-Lakehurst, as well as substantial populations of students from poor families. Most of the township is also in the protected Pinelands Reserve, which limits its ability to grow its tax base. 

Despite those challenges, Trongone supports Sweeney's approach and said the district has spent several years trying to reduce its reliance on Adjustment Aid. 

"We've been waiting for this shoe to drop. The district has been fiscally prudent for when this time has come," he said, adding that he believes there is also a moral obligation to support fairness for school districts like Delran and Chesterfield that have been shortchanged. 

"I want to do everything I can for Pemberton. But I know we have to look at the bigger picture," Trongone said.

The source of this quote is from this Burlington County Times article (which has some errors in it)

Pemberton's Mayor has also come out in acceptance of losing Adjustment Aid.  I now feel bad about calling Pemberton an "aid hoarder."  

Why the ELC's "Just Fund the Formula" is Impossible

On January 17th, David Sciarra of the Education Law Center appeared
before the Assembly Education Committee and presented his solution to the crisis of New Jersey education aid:

"Just Fund the Formula"

However, before Sciarra got to "solution," he began with a preamble that unintentionally explained the pension crisis, when he boasted that New Jersey:

"leads the nation by funding our public schools not on available dollars or raw political considerations, but on the needs of students and schools"

First, this history inaccurate.  NJ has never properly funded working class and poor non-Abbotts.  The utopian dream that Sciarra refers to only applies to the 31 districts that were lucky enough to receive the NJ Supreme Court's "Abbott Remedy."  [see below for disparities of funding between Abbotts and poor non-Abbotts]

Anyway, Sciarra is right about the overall immensity of the spending though and it is that 20+ year budgetary history of ignoring "available dollars" that pressured Florio, Whitman, and their successors to ultimately abandon New Jersey's pension system.

Anyway, Sciarra started with a message that said, literally and loudly, :  

"Just Fund the Formula"

Let’s get right to the heart of why we’re here today.   

The problem with school funding is not our formula but the fact that Governor Christie, since he took office in 2010, has steadfastly refused to fund it, even at reduced levels. He also cut $1.1 billion from the formula in his first budget, an aid cut yet to be restored in many districts across the state. NJ school districts should be – but are not – receiving an additional $1 billion in state aid in the current school year. 

Another consequence of the Governor’s failure to fund the SFRA is that more school districts are now “below adequacy,” and the gap between “adequacy” and the state and local revenue in district budgets has grown. Each district’s “adequacy budget” is at the heart of the SFRA; it represents the level of spending, based on weighted student enrollment, districts must have to provide a thorough and efficient education. ....

Sciarra then spent much of his testimony criticizing Christie's "Fairness Formula," even though no one had spoken in favor of it, before getting back to his Just Fund the Formula "solution," concluding:

So let’s keep our focus on the SFRA and what we can do to get districts on a path to adequacy through the formula. We can start with three simple steps:
• Beginning with the FY18 State Budget, implement a multi-year phase-in of new state aid through the SFRA formula, targeting the aid to districts that are most under adequacy and/or experiencing significant increases in student population.

       [to be continued on Sciarra's other steps.]

Ok, poor me.

The time it takes to refute bullshit is many times the amount of time it takes to create the bullshit in the first place, but here is my explanation of why Sciarra's "Just Fund the Formula" is impossible.

Here goes:

This is debt as a percentage of state income.

First, Sciarra never says what the cost is of "Just Fund the Formula," but for 2016-17, without redistribution, bringing every district up to its uncapped aid for K-12 would be $2 billion.  However, that $2 billion figure is sure to rise due to inflation and the fact that in most of NJ's underaided towns, Equalized Valuations are falling or lagging.  Since Local Fair Share depends, in part, on Equalized Valuation, this means that Local Fair Shares will fall and the state formula will increase aid targets for districts.

Fully funding the PreK component of SFRA would cost $700 million.  ($700 million = $13,500 per student x 50,000 eligible students)

$2.7 billion would be a large increase for any state, but New Jersey is one of the country's most indebted states, with up to $200 billion (state+local) in debt and unfunded liabilities.

Every year NJ's state revenue increases by about $1 billion through economic growth, but pension costs, medical costs, and debt servicing costs consume all that new revenue:

Although New Jersey's non-pension debt will actually fall by a few hundred million a year, the federal copay for ACA-related Medicaid expansion is also slated to fall too, so NJ's Medicaid expenses might eat up that savings.  

So David, the state is broke?  Get it?

But what about "making the rich and corporations pay their fair share?"

Ok.  Sure.  But raising the top bracket from 8.97% to 10.75% (which would give us the country's second highest top bracket) would only bring in $615 million and $615 million isn't even close to being enough to fully fund SFRA.

Sciarra would probably support other tax increases, like Combined Reporting, but the amount of money NJ might get from that is $100-$200 million.  Perhaps Combined Reporting is appropriate (even Republican Jack Ciattarelli supports it), but Combined Reporting was vigorously protested by businesses when Connecticut imposed it in 2015 and was one factor in GE's decision to leave the Nutmeg State.

Whatever the economic consequences are of Combined Reporting, even another $100-$200 million per year plus the $615 million per year from a higher top bracket are not enough to fully fund SFRA.
Other Education Law Center Ideas:

Aside from "Just Fund the Formula" Sciarra did present a few other ideas on charter schools and limited reductions of Adjustment Aid that I will address now:

Gradually phase out hold harmless aid [ie, Adjustment Aid] to districts that are over their SFRA adequacy budgets and to charter schools. Charter schools should also be required to adhere to the same 2% cap on excess fund balance as districts. 

Ok, if New Jersey only eliminated "Hold Harmless Aid" that currently goes to over Adequacy districts then the total amount of aid that could be redistributed is reduced from about $550 million to less than $100 million.

Also, although the over-Adequacy districts get $174,024,179 in Adjustment Aid, they mostly undertax and therefore they are nowhere near $174 million over Adequacy.

For instance, Asbury Park gets $24 million in (nominal) Adjustment Aid, but it is only $13.9 million above Adequacy.  Hoboken gets $5.4 million in Adjustment Aid, but it is only $1.1 million above Adequacy.  Pleasantville gets $14 million in Adjustment Aid, but it is only about $100,000 above Adequacy.  Etc etc etc.

All in all, if New Jersey follows David Sciarra's advice and no Adjustment Aid district is allowed to sink below Adequacy, the most aid that could be redistributed is $93 million.

The nine most underaided districts alone for 2016-17 (Bound Brook, Manchester Regional, East Newark, Freehold Boro, Atlantic County Vo-Tech, Fairview, Ridgefield Park, Hi Nella, and Atlantic City) have a combined aid deficit of $103 million.  

David Sciarra and the Education Law Center are very hostile to charter schools, so he basically lies about charter school surpluses to distract everyone from the injustice of Adjustment Aid.  "Charter schools should also be required to adhere to the same 2% cap on excess fund balance as districts."

This Education Law Center argument against charter school surpluses goes back to a 2015 report where the Education Law Center claimed that NJ charters had a $100 million hoard  that they were unethically withholding from district schools

However,  the unacknowledged context is:

1. The Education Law Center looked at charter surpluses in June, when charter school surpluses are at their peak due to the need to save money for salaries in July and August, when charter schools receive no money.
2. Charter schools do not receive facilities money (or very much of it) and cannot bond money, so they therefore have to save operating money for several years in order to pay for their construction needs.  

In any case, charter schools' purported $100 million cumulative "surplus" is less than one-fifth the "surplus aid" that overaided districts get annually via Adjustment Aid.

Sciarra concluded with a reform to the tax cap law I agree with:

• Raise the 2% cap on increases in local property taxes for school budgets in districts under their adequacy budgets and where there is a sizable gap between their local revenue level (local levy) and the local fair share under the SFRA.

Indeed.  When Jersey City's tax deficit compared to its Local Fair Share is over $200 million, something is wrong.  The Education Law Center should make this point more often.

However, Sciarra made this a peripheral demand compared to "Just Fund the Formula."

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David Sciarra began his statement praising New Jersey for ignoring "dollars available" and spending whatever Education Law Center lawyers and utopian Supreme Court judges demanded, however, a state government isn't like the federal government and eventually the money runs out.  New Jersey's economic growth has been half of the national average since 2002, so the money is basically running out now.

Again, Sciarra is also wrong that NJ's state aid has been given out according to the "needs of students and schools," since the Abbott decisions only applied to the 31 Abbott districts, and poor non-Abbotts have been savagely neglected.

Finally, I can't even begin to think how Sciarra believes he is giving an honest argument when he doesn't even give the full cost of fully funding SFRA.



WHAT Steve Sweeney and others are trying to do now is finally right that wrong and restore justice and common sense to a state aid landscape that aligns to need as it was in the 1980s, not today.

The Education Law Center's opposition to this reflects how it has become a reactionary organization that opposes its original tenets.  It is standing athwart common sense and justice.

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Below:  As you can see, poor non-Abbotts receive nowhere near as much state aid as Abbott districts do.

This chart does not include PreK money or construction money.